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Stock Market Today - 1/25: Nasdaq Falls 300 Points as Investors Consider Fed, Earnings

U.S. stocks slumped lower Tuesday, with another several hundred point peak-to-trough swing for the Dow, as investors looked through a slate of top-tier earnings and the start of the Federal Reserve's two-day policy meeting.

Updated at 4:20 pm EST

  • Dow closes lower, but records another several hundred point trough-to-peak swing as volatility gauges remain near one-year highs.
  • 10-year note yields creep higher as the Fed begins its two-day policy meeting in Washington, with rate traders betting on as many as four hikes this year.
  • General Electric shares slumps 6% after Q4 revenue miss and a 2022 profit outlook under its new reporting format.
  • Johnson & Johnson rises 2.8%, sees Covid vaccine sales rising to $3.5 billion this year, adding heft to a mixed Q4 earnings report. 
  • Nvidia shares slide 4.5% amid reports that it's ready to walk away from its $40 billion pursuit of chip designer Arm Holdings.
  • S&P 500 falls 54 points to extend its January decline to 8.6%.

U.S. stocks slumped lower Tuesday, with another several hundred point peak-to-trough swing for the Dow, as investors looked through a slate of top-tier earnings and the start of the Federal Reserve's two-day policy meeting.

Russia tensions remain a cloud over markets as well, with NATO declaring late Monday that it's putting troops in the region on standby, and beefing-up its military presence in Eastern Europe, amid a massing of soldiers near the Ukraine border. President Joe Biden has also put more than 8,000 U.S. servicemen and women on high alert.

Market concerns regarding the Fed's near-term policy tract, however, loomed larger throughout the Tuesday session, as slowing growth figures, alongside rising inflation data, puts the central bank's plans for a series of 2022 rate hikes in a different light.

The CME Group's FedWatch tool is pricing in only a 5.6% chance of a Wednesday increase, but expects the first of likely four hikes this year to begin in March. 

"The stock market is overreacting to Federal Reserve rate hike uncertainty and many investors are assuming that higher interest rates will lead to a prolonged stock market downturn, but we believe this assumption is false, as the relationship between stock prices and interest rates isn't so simple," said Julian Koski, chief investment officer of Rye, New York-based New Age Alpha.

"Investors should focus less on what the Federal Reserve may or may not do and instead focus more on the individual stocks they own and whether these stocks can deliver on the growth expectations that are baked into their valuations," he added.

How companies manage their way through higher rates -- as well as ongoing issues in global supply chains and rising employment costs -- was the main focus today as investors got December quarter updates from Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report, General Electric  (GE) - Get General Electric Company Report, 3M  (MMM) - Get 3M Company Report, Verizon  (VZ) - Get Verizon Communications Inc. Report, American Express  (AXP) - Get American Express Company Report and Lockheed Martin  (LMT) - Get Lockheed Martin Corporation Report prior to the start of trading.

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Collective S&P 500 profits are forecast to rise 23.1% for the fourth quarter, to $434.4 billion, before slowing to just 7.5% for the first three months of the year.

On Wall Street, the Dow closed 67 points lower to close at 34,297.73 points while the S&P 500 slumped 54 points to take its year-to-date decline to around 8.6%. The tech-focused Nasdaq Composite fell 315 points.

The CBOE Group's VIX volatility gauge, however, remains within touching distance of its one-year high, suggesting another wild ride Tuesday, particularly now that benchmark 10-year note yields are closing in on 1.8% in the overnight trading session, before easing to 1.756% in New York trading.

A host of big-name stocks were on the move throughout the session, with Tesla topping the activity list following a move last night by Moody's to boost the carmaker's credit rating by two notches, to Ba1, ahead of its quarterly earnings on Wednesday.

General Electric  (GE) - Get General Electric Company Report fell 6% after it posted stronger-than-expected fourth quarter earnings but fell short of revenue forecasts and issued a weak 2022 profit outlook.

Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report was higher, rising 2.7%, after it published stronger-than-expected fourth quarter earnings Tuesday while noting that sales of its single-shot Covid vaccine could rise to around $3.5 billion this year.

International Business Machines  (IBM) - Get International Business Machines Corporation Report, meanwhile, gained 5.65% after posting stronger-than-expected fourth quarter earnings late Monday in the first update since shedding its legacy infrastructure business to focus on cloud computing growth.

Microsoft  (MSFT) - Get Microsoft Corporation Report will post its fourth quarter earnings after the bell, with analysts looking for record revenues of more than $50 billion and an adjusted bottom line of $2.31 per share.

Nvidia  (NVDA) - Get NVIDIA Corporation Report shares, meanwhile, slumped 4.5% lower amid reports that the chipmaker is ready to abandon its $40 billion takeover of U.K.-based Arm Holdings.

In overseas markets, Europe's Stoxx 600 closed 0.7% higher in Frankfurt, but closing tracking U.S. equity futures, while the MSCI ex-Japan index in Asia fell 1.4%.